NEW DELHI: Natural gas prices in India are likely to decline 17 per cent in April to $3.15 per unit, further straining economics of developing discoveries in deep sea.

As per the new gas pricing formula approved by the NDA-government in October 2014, gas prices are to be determined on a semi-annual basis and calculated based on a volume weighted average of rates in gas surplus nations of the US, Canada and Russia, based on the twelve-month trailing average price with a lag of three months.

Using benchmark prices for the period of January 1, 2015 to December 31, 2015, gas price for the period April 2016 to September 2016 is likely to be about $3.15 per million British thermal unit as against $3.82 currently, sources said.

On a net-calorific value (CV) basis, the gas price is likely to be $3.50 per mmBtu as compared to $4.24 currently.

Development of numerous existing discoveries in the blocks operated by state-owned Oil and Natural Gas Corp (ONGC) as well as Reliance Industries are dependent on remunerative price.

The company has asked the government to raise the rates to make developing the explorations economically viable, he had said.

Goldman Sachs had in a recent report stated that "Indian domestic natural gas prices that are linked to prices in gas surplus economies remain materially below the costs to develop marginal and deep-water fields and hence do not incentivise exploration and production capex."

This has resulted in Indian producers potentially losing $2 billion annually in value added assuming they can replace imports entirely, it added.

"We believe the current gas price regime is not incentivising domestic capex sufficiently as we expect prices under the current formula to decline in 2016-17 while cost for new deep-water discoveries ranges between $6 to $7 per mmBtu," Goldman had said.

Gas price in India, it said, is lower than $9 per mmBtu in China, $10.5 in the Philippines, $6.5 in Indonesia and $8 per mmBtu in Thailand and Malaysia.

Sources said going by current price trends, gas price may rise marginally to $3.32 (on gross calorific value or GCV basis) in second half of 2016-17 fiscal.

They may further rise to $3.36 per mmBtu and $3.42 in the first and second half of 2017-18 fiscal and would be around $3.45 in the following fiscal.